LaCrosse Footwear, for the third quarter of 2005, reported consolidated net sales of $31.0 million, compared to $34.5 million in the third quarter of 2004. Sales in the third quarter of 2004 included $2.8 million from General Services Administration (GSA) delivery orders for uniform boots (not part of an on- going contract) and $1.6 million from the discontinued PVC boot line (PVC). Excluding sales from GSA delivery orders and PVC in the third quarter of 2004, consolidated net sales grew 3% year-over-year in the same period of 2005. During the third quarter of 2005, increased petroleum prices and a general slowdown in consumer spending adversely impacted sales growth.
For the first three quarters of 2005, consolidated net sales were $69.6 million, compared to $76.8 million in the same period of 2004. Excluding sales of $7.6 million from GSA delivery orders and $4.8 million from PVC in the first three quarters of 2004, consolidated net sales grew 8% year-over- year in the same period of 2005.
Sales to the outdoor market were $18.9 million for the third quarter of 2005, up 1% from $18.7 million in the same period of 2004. Because sales to the outdoor market are based more on discretionary consumer spending, the challenging economic trends strongly impacted outdoor sales in the third quarter of 2005. Yet the modest sales growth reflects the Company's successful introduction of new fall product lines and continued penetration into the hunting and rubber boot markets.
Sales to the work market were $12.1 million for the third quarter of 2005, compared to $15.8 million in the same period of 2004. Excluding GSA and PVC sales totaling $4.4 million in the third quarter of 2004, work sales grew 6% year-over-year in the third quarter of 2005, reflecting the success of the new fall product lines and continued penetration in the general work, law enforcement, firefighting and military boot markets. The adverse economic factors had a lesser impact on the work market, where the products are viewed as a necessary tool of the trade.
In the third quarter of 2005, the Company's gross margin was 36.7% of consolidated net sales, up from 35.1% in the same period of 2004. The margin improvement of 160 basis points reflects increased sales of new higher-margin products as well as the Company's strategic discontinuation of lower margin products, including PVC.
Operating expenses decreased 10.4% from the third quarter of 2004, due primarily to a one-time charge of $0.9 million associated with the closure of a manufacturing facility in same period of 2004. Excluding the impact of the write-down, year-over-year operating expenses were unchanged.
Consolidated net income was $2.5 million or $0.40 income per common share in the third quarter of 2005, compared to $3.9 million or $0.64 income per common share in the third quarter of 2004. For the first three quarters of 2005, consolidated net income was $3.2 million or $0.52 net income per common share, compared to $4.8 million or $0.78 income per common share in the same period of 2004. Results in the third quarter and first three quarters of 2005 included an income tax expense of $1.4 million and $1.8 million, respectively, compared to an income tax benefit of $0.1 million in the same periods of 2004, due to the use of federal net operating loss carryforwards, which were fully utilized during 2004.
Inventory increased by $10.7 million due to: establishing new product lines; increasing customer service response times; support of anticipated fall and winter demand; and additional inventory related to lower than anticipated sales. Inventory levels historically decline during the fourth quarter of the year.
“Despite challenging economic conditions, we are encouraged with our sales and earnings performance in our core work and outdoor business in the third quarter,” said Joseph P. Schneider, CEO of LaCrosse Footwear. “During the quarter, we continued to increase our brand equity in both the work and outdoor footwear markets with our fall line of high-performance, innovative and quality footwear.”
“We are very pleased by our customers' response to our new spring lines for 2006, which will include a broader selection of compelling, high- performance footwear in both work and outdoor categories, as well as extensions of our powerful brands into new product categories. We are excited about the potential of our spring line and our overall momentum, and we continue to invest in future product development.”
